The Cayman Islands was the main offshore jurisdiction for mergers and acquisitions in 2016, with about a third of all offshore transactions involving Cayman-based companies.
Offshore law firm Appleby noted in its latest Offshore-i report that last year Cayman-incorporated companies were the target of 920 transactions worth a combined US$84 billion, representing 36 percent of total offshore deal value.
The number of transactions was down from 2015’s total of 1,013, and slightly higher than the 907 deals that took place in 2014.
“Cayman remained the leader in offshore deal volume and value in 2016, accounting for the largest portion of the year’s offshore deal activity and four of the year’s 10 largest offshore deals,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “While the year saw a drop-off from record highs of 2015 across offshore jurisdictions, many of the key drivers of a healthy deal-making environment remain going into 2017.”
Two of Cayman’s largest deals, each worth US$4.5 billion, involved mobile technology companies. One transaction saw a consortium including China Merchants Bank investing in Cayman-incorporated software publisher Xiaoju Kuaizhi. In the other deal, Chongqing New Century Cruise acquired mobile gaming company Alpha Frontier Ltd.
While Cayman remained the top jurisdiction for offshore transactions in 2016, the British Virgin Islands and Hong Kong were the standouts of the year as the only two offshore jurisdictions to see an increase in activity over 2015, the report found.
The largest offshore deal announced in 2016 was the US$6.3 billion purchase of Bermuda-based property and casualty insurance services company Endurance Specialty Holding. The real estate sector also featured prominently in the top 10 and included the $4.5 billion sale of CITIC Real Estate Co & Tuxiana Corp., incorporated in the British Virgin Islands and China, to China Overseas Land & Investment.
Overall, there were 2,895 deals targeting offshore companies in 2016 for a total value of $234 billion.
Each deal in the offshore top 10 was worth more than $2 billion, and 46 transactions in 2016 were worth at least $1 billion.
In addition to deals targeting offshore-based firms, the report noted that transactions in which offshore companies are the acquirer have increased steadily for the last five years and are now exceeding the number of acquisitions of offshore companies.
The year 2016 recorded 3,127 such deals worth a cumulative $339 billion. Cayman companies were the biggest spenders, accounting for $102 billion in outbound transactions.
“As with inbound deals, we see a healthy spread of sectors represented in the top 10 deals of the year involving an offshore acquirer, including energy, transport, data processing and software publishing,” said Cameron Adderley, partner and global head of Corporate at Appleby. “Deal-makers are establishing holding companies offshore to take advantage of the many technical, legal and regulatory advantages of these jurisdictions, and then using those companies to make acquisitions.”
Cayman-incorporated companies were also responsible for the vast majority of completed initial public offerings, representing 70 percent of offshore activity. Of the 57 Cayman-based IPOs, more than two-thirds were completed on the Hong Kong Exchange (HKEX).
The total number of IPOs in 2016 dropped in line with the year’s overall downward trend compared with the previous year, Appleby reported.